How economy plays into Iran's turmoil

Djavad Salehi-Isfahani, professor of economics at Virginia Tech and fellow at the Brookings Institution - vt.edu

TEXT OF INTERVIEW

Kai Ryssdal: Street protests continued in Iran today. There are reports of confrontations between riot police and protesters near the parliament building in Tehran. There are no signs of political compromise coming, so we turn now to how the Iranian economy might recover. Djavad Salehi-Isfahani is on the line from Tehran. He's a professor of economics at Virginia Tech. As I said, he's in Tehran right now. Good to have you with us professor.

Djavad Salehi-Isfahani: Good to be with you.

Ryssdal: Obviously these protests that are happening in the streets of Tehran and across the country are intensely political and social in nature, but once things calm down, there will be an economic context in which Iran has to function. Could you frame that context for us? What is happening there in the Iranian economy?

Salehi-Isfahani: There are two issues that come to mind. One is the fact that oil prices are lower. And even without any disturbance, the new government would face huge problems in terms of limiting demand so the budget deficit would be manageable and the trade deficit would be manageable. The second issue that is really important now is that the technical elite, and I'm thinking of doctors, engineers, lawyers, teachers, are quite disheartened by this turn of events, and it's going to be difficult to get them back to work with the same full purpose as before.

Ryssdal: So what will President Ahmadinejad or whoever winds up running the new administration in Iran, how will they get the middle class, the backbone of a growing economy, to buy in and to participate then?

Salehi-Isfahani: That's a big challenge for them. I suspect very strongly that President Ahmadinejad is going to continue. Very few people bet that he's going to be out of government, so I hope that they are thinking hard about finding a way to deal with the crisis in a more peaceful way. This is a complex economy. It's been doing relatively well. And it's been providing basic services to people: health, education. So things are working in some way, and to throw that away to win political hegemony. I think that would be very unproductive.

Ryssdal: What do you hear though from your friends in Tehran right now, when you go out to dinner, and what socializing you can do in this environment, about how they feel about the prospects of the Iranian economy.

Salehi-Isfahani: People are all in a very grim mood right now. I think everybody is just waiting to see what happens. They are expecting some kind of magic to come from former President Rafsanjani, who is the heavyweight political figure, but he has not been seen or talked. So everybody is in a holding pattern. The bazaar, I'm told, I haven't been there, but I talked to the taxi drivers. They said the bazaar is nearly empty today. They're not on strike but nobody is buying.

Ryssdal: What about you? How do you feel?

Salehi-Isfahani: Well, I've been very optimistic. I've been watching data every year showing how rural women go to school. Their health status is up. I work on fertility. I watch women going from seven births on average down to two births. For an economist, this is an amazing achievement. This country has the potential for rapid economic growth and modernization. And it is very sad to see all that be put up, basically, in danger with this election, this feud and this power struggle that's going on.

I feel very strongly for a 10-year-old girl who's trying to work very hard, do her homework every night to get into a university -- looking forward to getting to college -- and then watch the politics in Tehran kind of shatter that dream and that picture.

Ryssdal: Djavad Salehi-Isfahani is a professor of economics at Virginia Tech University. He's a scholar at the Brookings Institution, and this week he is in Tehran. Professor, thank you so much.